Poor promised protection from impact of fuel tax increase

The administration’s economic man­agers have formally guaranteed “so­cial-protection initiatives” to shield the poor and low-income households from the impact of the proposed ad­justments in excise fuel taxes under the initial comprehensive tax-reform program that the government submit­ted last September to Congress for its approval.

In a joint statement, Finance Secretary Carlos Dominguez III, Budget Secretary Benjamin Dio­kno and Socioeconomic Planning Secretary Er­nesto Pernia, concurrent director-general of the National Economic and Development Authority (Neda), cited “highly tar­geted transfer programs” that would help cushion the impact of the pro­posed indexing to infla­tion of the excise taxes on oil products on “the poorest 50 percent of the population.”

Finance Undersecretary Karl Kendrick Chua said one conclusion by the Family Income and Expenditure Survey (FIES) of 2015 that the Pantawid Pamilyang Pilipi­no Program (4Ps) has apparently gained traction gives the DOF more reason to pursue tax-and-transfer measures that directly target and benefit the poorest families, in lieu of blind subsidies and exemptions from the value-added tax (VAT) and other taxes that are vulnerable to multibil­lion-peso leakages and benefit more the affluent families and big corporations.

“However, the DOF tax plan provides for highly tar­geted transfers plus expanded health services to cushion the impact of the proposed adjustment in tax rates on the poorest families as well as on other vulnerable sectors like indigent senior citizens and persons with disabilities (PWDs),” said Chua.

“What the previous government did was mainly to uplift those closer to the poverty line,” said Chua, adding that the DOF will go over the government’s latest house­hold survey data and poverty statistics “to assess their impact on the DOF’s tax and welfare estimates.”

Chua said reducing the poverty incidence from 22 percent to 13 percent is “doable but more challenging, as it is easier to uplift those near the poverty line, which the previous government did, than those who are severely poor, which is the task of the Duterte administration.”

“This is why we must accelerate tax reforms to eq­uitably raise money to invest in the poorest families by providing them with better education and health services, and in rural infrastructure like more targeted farm-to-mar­ket road and irrigation projects,” he said.

“We need to accelerate NFA reform to help bring down retail rice price without farm incomes necessarily falling, as well as simplifying business regulations, en­hancing competition to level the playing field, and secur­ing property rights. All these can help micro, small and medium enterprises create more and better jobs to help accelerate poverty reduction,” Chua added.

Dominguez agreed with Chua that slashing the pover­ty rate from almost 22 percent to just 13 percent by 2022 remained “doable,” but that it would require “the Duterte administration to work doubly hard in fleshing out pro­grams of the 10-point socioeconomic agenda that would boost growth and generate enough jobs and livelihood opportunities nationwide as a way to raise incomes for the poor to meet their food and non-food needs. At the same time, food prices need to be managed so that they do not eat up income growth.”

Dominguez, who once served as agriculture sec­retary, said, “The government’s focus should be on the countryside, as the severely poor are mostly in rural ar­eas.”

The finance secretary also said, “This also means that we have to pursue tax reforms in the Congress without letup so the Duterte administration can gener­ate enough revenues to bankroll both the pro-poor and business-friendly programs of the 10-point socioeco­nomic agenda on inclusive growth.”

A main feature of the first reform package sub­mitted by the DOF to the legislature last September is that personal income-tax (PIT) rates would be cut from 32 percent to 25 percent that would, in effect, exempt 4.7 million taxpayers, including the current 1.7 million minimum- wage earners, from paying income taxes. Three million more taxpayers with taxable incomes of P250,000 and below would be included in the batch that would pay zero taxes.

A total of 450,000 other taxpayers, as gathered from the 2013 database of the Bureau of Internal Rev­enue (BIR), would pay only 20 percent of the excess of P250,000 of their net taxable income.

For those with a net taxable income of P400,000 but not over P800,000, the highest tax they would pay under the new tax reform plan is P130,000, compared to the current system where they are now shelling out a maximum of P221,000 for PIT.

Based on the 2013 BIR database, this bracket con­sists of 357,875 taxpayers representing 4 percent of the total tax base for individuals, and includes govern­ment workers under Salary Grades 18 to 25.

For individuals with net taxable income of P800,000 but not exceeding P2 million, which covers 114,856 people or 3 percent of the tax base, the maxi­mum PIT paid under this bracket would only be paying P490,000 in the first year of implementation, compared to P605,000 under the current system.

Some 28,000 workers earning P2 million to P5 mil­lion, representing one percent of the tax base would be taxed P490,000 plus 32 percent of their annual gross income in excess of P2 million.

The maximum PIT under this bracket is P1,450,000, compared to the current system where one has to cough up P1,565,000 for earning P5 million a year.

The last bracket of ultra-rich taxpayers comprising less than 6,000 people earning over P5 million would have to pay a tax of P1.45 million, plus 35 percent of the amount in excess of P5 million.